Source: Cointelegraph Original: "{title}"
Author: Anurag Arjun, Co-founder of Avail
On paper, SocialFi is undoubtedly promising. It promises to change the power dynamics of social media—allowing people to control how their content and personal data are used and monetized. It even offers users a share of the $200 billion social media advertising market, a pie that is currently almost entirely devoured by giants like Meta.
However, SocialFi platforms today feel more like digital ghost towns than the bustling centers of Web2. Friend.tech was hailed as the breakout star of 2023, but its peak daily active user count was only 80,000, which then plummeted below 10,000. What is hindering the development of SocialFi? Why does it seem to be following Friend.tech into obscurity rather than rising to challenge Facebook's dominance?
The harsh reality is that decentralized social networks have largely failed to attract and retain mainstream users, despite the enthusiasm from the Web3 community. The fundamental promises of user ownership, data portability, and monetization remain compelling, but deep-seated structural issues are hindering network adoption.
Blockchain infrastructure was never designed for the high throughput and low latency demands of social networks. Social media users expect instant results when posting pictures, liking comments, or following new accounts—actions that generate billions of transactions daily on platforms like Instagram, TikTok, and X.
Consider this: Ethereum can only process 15-20 transactions per second (TPS). Even Solana, often touted as a high-performance chain, has a TPS of only about 5,000. The gap is staggering compared to TikTok's 25 million video uploads per day or X's 500 million posts daily. If users face a 30-second confirmation delay when commenting on posts, or experience unstable gas fees ranging from $0.10 to $50 during network congestion, they are unlikely to adopt the technology.
Meta spends $35 billion annually on R&D to refine the addictive simplicity of its platform. TikTok's algorithm has been honed through a billion hours of user engagement daily, providing content so compelling that 47% of users open the app immediately upon waking. What is the result? The technology fades into the background of the user experience.
In contrast, most SocialFi platforms present new users with wallet pop-ups, cryptocurrency jargon, and variable fees. This is both confusing and intimidating for mainstream users. A 2023 study by DappRadar found that 92% of SocialFi users abandoned the platform within 30 days. Unless SocialFi applications can offer a frictionless experience comparable to Web2 counterparts while providing unique advantages, their adoption will be limited to cryptocurrency natives.
The multi-chain world of Web3 has fragmented SocialFi into isolated islands. The social graph of Lens Protocol cannot integrate with Farcaster. The monetization tools of Friend.tech have not been ported to DeSo. What is the result? A disjointed experience with no network effects.
Recently: Avara's Lens company secured $31 million in investment for a SocialFi-focused L2 blockchain.
Imagine if Gmail users had to pay to send an email to someone on Outlook and couldn't carry their contacts or information with them. This is the reality of SocialFi today.
To address this issue, decentralized identity systems like ENS and emerging standards like EAS must support portable, composable social graphs. Users' content, followers, and reputation should be portable, benefiting a broader ecosystem rather than just one application.
The solution to the SocialFi application dilemma is not to incrementally improve existing models but to design dedicated infrastructure specifically for social applications. Just as horizontal scaling transformed Web2 infrastructure, modular blockchain architecture separates concerns like data availability, execution, and settlement, laying the groundwork for social applications that can scale to billions of users.
This shift has already begun. Farcaster has migrated from the Ethereum mainnet to the Optimism layer 2 stack, prioritizing low-cost social interactions. Lens Protocol is migrating to ZKsync, leveraging zero-knowledge proofs for scaling while protecting user privacy. CyberConnect has launched its own L1 chain, Cyber, optimized for social applications, now enabling faster and cheaper interactions through embedded social graphs.
These purpose-built stacks reflect the scaling approach of Web2—separating data, execution, and storage to handle exponential growth. The Web3 version adopts a modular architecture: rollups for performance, decentralized storage for media, and identity layers like ENS or Lit Protocol.
Built on the right foundation, SocialFi can ultimately deliver on its core promise: putting users back at the center of the social network experience. This means true ownership of identity and content, a portable social graph across applications, and fair value distribution for content creators and curators.
Its opportunities extend far beyond fixing the flaws of Web2 social media. True ownership allows creators to maintain control and port their audiences across platforms. Programmable money enables instant revenue sharing for viral trends like TikTok challenges—imagine a dance challenge where 10% of ad revenue is automatically allocated to creators.
Combining programmable money with social connections opens up new interaction models—from seamless tipping for quality content to automatic revenue sharing for collaborative creation.
The early iterations of SocialFi have failed to gain meaningful traction outside of cryptocurrency enthusiasts. If we ultimately address the fundamental technical and user experience barriers, Web3 Social can offer significant advantages that mature platforms cannot, advantages that only Web3 can provide.
Perspective: Anurag Arjun, Co-founder of Avail.
This article is for general informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed in the text are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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